1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Funds Investors: 193
LikeFolio’s Megan Brantley said in a latest program on Schwab Network that her data shows an increased consumer interest in NVIDIA Corporation (NASDAQ:NVDA) products and she believes the company is gaining momentum:
“I think that Nvidia has performed so well it’s natural for investors to say, “Okay, how much can this growth keep going at this pace, and at what point is this overvalued?” At these levels, we can look at things and the places that we can look for Nvidia are overall consumer demand. So, are people continuing to talk about Nvidia and its products—specifically its Blackwell line—at a higher rate, and are they visiting sites and showing signs of forward-looking interest for Nvidia? So far, at least in our metrics, they are. We see Nvidia web visits up by about 22% year-over-year, and this is actually accelerating if you look at this on a 30-day moving average versus a 90-day moving average. What’s impressive about this for us is that this is just a sign of momentum. For us, this tells us that demand is continuing to outpace supply. We look at this too, and what’s crazy is that Nvidia already has a really significant market share versus other players in this field, yet its growth rate remains the highest. It is nice to see AMD start to gain some traction there as well when it comes to consumer interests, but Nvidia is already the largest player in the game and it’s just extending its lead. So I think as an investor, that’s really powerful to know that this is the best of breed. At least on our end, the chatter and discussions related to its products continue to grow.”
However, web visits does not seem like a good indicator to gauge Nvidia AI chips demand.
The market will keep punishing Nvidia for not coming up to its gigantic (and sometimes unrealistic) growth expectations. About 50% of the company’s revenue comes from large cloud providers, which are rethinking their plans amid the DeepSeek launch and looking for low-cost chips. Nvidia’s Q1 guidance shows a 9.4% QoQ revenue growth, down from the previous 12% QoQ growth. Its adjusted margin is expected to be down substantially as well to 71%. Market does not like when Nvidia fails to post a strong quarterly beat. The stock will remain under pressure in the coming quarters when the company will report unimpressive growth.
Nvidia is facing challenges at several levels. Competition is one of them. Major competitors like Apple, Qualcomm, and AMD are vying for TSMC’s 3nm capacity, which could limit Nvidia’s access to these chips. Why? Because Nvidia also uses TSMC’s 3nm process nodes. Nvidia is also facing direct competition from other giants that are deciding to make their own chips. Amazon, with its Trainium2 AI chips, offer alternatives. Trainium2 chips could provide cost savings and superior computational power, which could shift AI workloads away from Nvidia’s offerings. Apple is reportedly working with Broadcom to develop an AI server processor. Intel is also trying hard to get back into the game with Jaguar Shores GPU process, set to be produced on its 18A or 14A node.
RiverPark Large Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA): NVDA was a top contributor in the fourth quarter following blowout 1Q results and guidance driven by strong data center sales (+427% year-over-year). The company reported revenue of $26 billion, up 262% year-over-year, and EPS of $6.12, up 462% year-over-year and 9% ahead of expectations. Revenue guidance for 2Q of $28 billion was 5% above very high expectations. The artificial intelligence arms race, kicked off by ChatGPT and Alphabet’s Bard, among others, has generated tremendous demand for Nvidia’s next generation graphic processors.
NVDA is the leading designer of graphics processing units (GPU’s) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company’s press release, “a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the Top 10 AI News Updates Taking Wall Street By Storm and the 12 AI Stocks on Wall Street’s Radar Today.
